Textbook Notes (369,133)
United States (206,214)
Economics (193)
ECON 351 (21)
Chapter 6

Chapter 6_Stock Market, Information, Financial Market Efficiency.docx

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Course Code
ECON 351
Frank Sorokach

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Chapter 6: Stock Market, Information, Financial Market Efficiency  Sole Proprietors – sole owners of a firm and people who own a firm with partners have unlimited liability for the firm’s debts. The owners of these firms run the risk that if the firm goes bankrupt; anyone the firm owes money to can sue the owners for their personal assets.  Corporation – a legal form of business that provides owners with protection from losing more than their investment if the business fails  Limited Liability – a legal provision that shields owners of a corporation from losing more than they have invested in the firm  Stock Market Index – an average of stock prices that is used to measure the overall performance of the stock market. - 5,100 publicly traded U.S. firms represent 10% of firms listed on stock exchanges worldwide 1. Dow Jones IndustrialAverage – average of the prices of the stocks of just 30 large firms which including [Coca-Cola, Microsoft, Walt Disney] 2. S&P 500 – includes the 30 stocks that are in the Dow as well as stocks issued by 470 other large companies covering about 75% of theAmerican equity market by capitalization. [Apple, AT&T, Dell,American Express] 3. NASDAQ – includes 2750 stocks that are traded over the counter market. It includes stocks issued by many smaller technology firms that are not included in other index. [Tesla Motors, Google, Facebook]  Does the performance of stock market matter to the economy? - Fluctuation in stock prices can affect the economy by influencing the spending of households and firms. • Rising stock prices => increase spending => increase in production and employment. •
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